US Retail Sales Slow After Healthy Gains In July

U.S. retail sales were virtually unchanged in July after rising in June, suggesting a key driver of the world’s largest economy had reached a plateau by mid-summer.

Retail sales were flat in July, in line with a revised 0.8% gain in June, according to figures released Friday by the Commerce Department.

“The Fed has a consumer demand-centric view of economic activity and this report is one more hurdle to a rate hike in September”, said John Ryding, chief economist at RDQ Economics in NY.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

There were some signs of consumer strength in Friday’s report: Auto sales rose a solid 1.1 percent, and sales for online and catalog retailers increased 1.3 percent.

“Retail sales disappointed in July, flat over the month against expectations for an increase”, Gus Faucher, deputy chief economist at The PNC Financial Services Group, wrote in a research note Friday, highlighting that “details were generally soft” with “spending down in most categories”.

The drop in ex-auto sales was partly due to a 2.7 percent slump in sales by gas stations, which fell amid lower gasoline prices. Excluding automobiles, gasoline, building materials and food services, retail sales were also unchanged last month after an unrevised 0.5% increase in June. Prices of U.S. Treasuries rose.

Still, employers are hiring at a robust pace, adding 255,000 jobs in July and 292,000 in June, which was the most in eight months.

Inflation has remained stubbornly low and, while the labor market has been strong in recent months, overall economic growth was weak in the second quarter, making the current recovery the slowest since World War II. The government’s June retail sales assessment was revised up from a 0.6% increase to a 0.8% rise.

It isn’t clear how much longer auto sales can support overall consumer spending. Higher wages would likely fuel more spending in coming months.

Americans spent less at clothing shops, sporting goods stores and electronics and appliance outlets, the Commerce Department said Friday. Receipts at building materials and garden equipment retailers fell 0.5 percent. Americans also cut back on spending at restaurants and bars and sales at food and beverage stores recorded their largest drop since May 2011.